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Saturday, July 14, 2012

Money changers run out of Malaysian ringgit

SINGAPORE: Some
money changers in Singapore on Friday ran out of Malaysian ringgit notes
after the favourable exchange rate sparked strong interest from buyers
taking the chance to stretch their dollar by picking up ringgit on the
cheap.

The Singapore dollar is trading at one to 2.51 Malaysian
ringgit, after hitting a 14-year high against the Malaysian currency
this week.

The ringgit is under pressure as Malaysia's general
election looms and as investors exit emerging Asian markets for safer
assets.

Sim Moh Siong, a currency strategist at Bank of
Singapore, said: "I think part of the under-performance could be due to
the drop in commodity prices, especially in terms of crude oil and palm
oil. That seems to be an overhang on the ringgit."

Currency analysts said the ringgit could weaken further this year, on risks from Malaysia's upcoming general election.

This could push the Singapore dollar to 2.55 versus the ringgit within the year, before moderating to 2.45 by end-2013.

Saktiandi
Supaat, who is head of currency research at Maybank, said: "It's a
reflection also of how market participants see Malaysian assets and also
the tolerance level of Bank Negara in terms of allowing some
flexibility in the ringgit.

"The ringgit has fluctuated or
reacted more than the Singapore dollar to Eurozone and global risks such
as growth issues. The structural issues on Singapore dollar restrict
the way it reacts."

Global economic uncertainty has caused
investors to pull money out of riskier assets like emerging-Asia
currencies as they opt for safe haven assets like the US dollar.

The Singapore dollar has also been attracting these investors.

It has appreciated 2.5 per cent against the Thai baht and Indonesian rupiah this year.

Lee
Chen Hoay, an investment analyst at Phillip Futures, said: "Because of
the Eurozone crisis, it has increased the risk aversion in the market.
And you even see things like Switzerland and Denmark being able to issue
bonds at negative yield.

"So that means investors are willing to
pay more money to get less, to protect their capital. And Singapore,
being the only Southeast Asian currency with triple A, has an increased
appeal."

Analysts said that should the Singapore dollar continue
strengthening versus the ringgit, Singapore companies with operations in
Malaysia could see profits take a hit.

However, Malaysian companies with operations in Singapore may see currency gains as they repatriate profits.